Opening Doors to Research: A New Global Patent Regime for Pharmaceuticals

Lanjouw, Jean Olson, Brookings Review

A bitter decade-long dispute over pharmaceutical patent protection in developing countries has become exceptionally costly. The clash between the pharmaceutical industry and advocates for the poor may not only hinder research on diseases endemic to the developing world but also call into question the entire system of supporting research through patent rights.

Setting patent standards was one of the most contentious issues in negotiations leading to establishment of the World Trade Organization in 1995. After heated debate, WTO founders agreed to require all member countries, including those in the developing world, to issue patent rights on pharmaceutical products. The decision sparked angry criticism, which has only intensified with growing awareness of the AIDS crisis and the development of effective, but expensive, drug therapies to combat the disease. Although the pharmaceutical industry insists on the benefits of strong patents on drug innovations, others are adamant that inventors should have only limited rights to control the sale of pharmaceuticals in the developing world, or no rights at all. Pharmaceutical firms' current strategy--to negotiate price and licensing terms product-by-product and country-by-country for the developing world--has left them vulnerable to criticism by advocates for the poor. The negative attention focused on the industry has implications that go far beyond development, and corn promise on this highly charged issue is urgently needed.

The Roadblock of Uncertainty

Patents exist to stimulate research. But the current uncertainty about the form of future patent rights in the developing world prevents patents from being of any use as a research incentive there. Why would a pharmaceutical firm invest now in a product for a poor country when it can have no way of knowing what patent protection will be available there in 10 years once product development is finally complete and the product is ready to market? This fallout of the long-running dispute is particularly unfortunate because it hinders research on drugs for diseases, such as malaria, that kill millions of people in the developing world each year. These diseases receive few research dollars, and private incentives to invest have been largely absent. Until a more predictable and reliable global system is set up, patent rights can do nothing to help bridge this gap.

What would a predictable and reliable system look like? For patent rights to be predictable, the rules must be clear. This means avoiding the ambiguities that give rise to disputes over interpretation. For patent rights to be reliable, the global system must be viewed as "fair." Otherwise, inventors will continue to risk attack if they try to exercise their patent rights.

For the global system to be seen as fair, it will surely need to recognize differences in the development level of countries. Too many people remain unconvinced that the poorest countries should be required to set up a U.S.-style patent system. In fact, many of the developed countries themselves did not protect pharmaceutical innovations until they reached a far higher level of income than the poor countries have today. Greece, Norway, Portugal and Spain, for example, introduced pharmaceutical patents only in 1992, when GDP per capita exceeded $12,000 (in 2001 dollars).

Disagreement over the appropriate form of global patent rights has gone on for a long time and has become very public. Positions on both sides are entrenched. But finding a resolution remains imperative. How can a patent system recognize differences in countries' well-being and, at the same time, encourage the private sector to become involved in creating new products for the developing world?

One solution would be to establish a system where patent protection in poor countries differs across diseases depending on the importance of those countries' markets as a potential source of research incentives. …

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